Piero Reece

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piero@ca-res.com

Buyer Don'ts

What to Avoid During a Home Purchase

In the rush of excitement that comes with an accepted offer and a "yes" from the lender, some homebuyers make the error of carrying their enthusiasm straight to the mall or furniture store. There are still a few major hurdles to jump before your loan closes. We have given you a list of things below we suggest you avoid when waiting for your loan to close.

Don't overspend on big-ticket items Although you may be dreaming of ways to turn your new home into a showplace, avoid big ticket purchases like appliances, electronics, or furniture. We also recommend that you avoid vacations and car purchases until the closing of your loan. Using plastic to buy new living room furniture could jeopardize your lending process by distorting your numbers. It's also a red flag to make those large purchases using cash. Lending Institutions are looking at your available cash when considering your loan.

Don't look for a new job. Lending Institutions like to see a consistent job history on your application. Getting a new career before you start the application process for a loan may not compromise your approval at all. However, if you switch careers before your loan is approved, your mortgage process could fail or be slowed down.

Don't change banks or move money around in your bank accounts. While the lending institution considers your mortgage loan application, you will probably be instructed to submit bank statements for the last few months for your checking accounts, savings accounts, money market funds and other liquid wealth. To eliminate potential fraud, most loans require a thorough paper trail to document the source of all cash. Even for innocent reasons, transferring cash or switching banks might make it harder for your lender to document your bank history.

Don't give money directly to your seller (generally in the case of of "for sale by owner") to be used as earnest money. As a rule, your good faith deposit is yours, not the seller's up until the deal closes. The FSBO seller may not realize that your good faith funds is to be used for your expenses at closing. We recommend that you put the funds into a trust account, or get a neutral person, like an attorney to hold them until the closing of the sale. Should your home purchase fail, your purchase contract should dictate where the earnest money should go.

California Housing Administration can walk you through the pitfalls of getting a mortgage. Call us: 619-327-1400.